All industries experience peaks and troughs, but does anywhere have it quite so dramatic (and traumatic) as oil and gas? Since the second half of 2014, oil prices have plummeted, from around $110 per barrel to less than $50 a barrel. All oil companies are battening down the hatches. At the time of writing, it’s just been reported that Tullow Oil, the British oil and gas exploration multinational, could fall out of the FTSE 100.
Given all that, it’s no surprise to hear Tullow’s chief HR officer Gordon Headley confide: “The drop in price means we are having to look at costs in a very big way; we are looking at restructuring our entire company.” He further reveals any headcount reductions are likely to be “significant”.
But having worked in the oil and gas industry for most of his career, Headley has been through this before, and so remains relatively circumspect.
“The industry is typically cyclical,” he says. “In 1999, the oil price hit $8.50 a barrel. In order to sustain itself, the business has to assume the price will stay low for two or three years and survive through that. You cut your cloth accordingly. We can’t maintain the same outlook we did with $150 a barrel.”
He points out that any downturn in the oil industry tends to coincide with other sectors doing well, as the low oil price stimulates the rest of the economy. That should mean people leaving corporate functions are more likely to find new roles in other industries. PwC has predicted a low oil price could create an extra 121,000 jobs in 2016.
Headley acknowledges the mood at Tullow is “not very good” right now and that there has been an increase in calls to the employee assistance programme line. “Generally the uncertainty is for people who have never been through this cycle,” he says. “The younger folk who we want to keep in the industry are particularly nervous. The important thing is to try and keep the wheels on track, with integrity and dignity.”
For Headley personally this will be particularly interesting as he reveals a few weeks after our interview that the scale of the restructure is so great that his own role is being made redundant. Once he leaves, HR will report into another VP without HR experience. He will be managing the transition but leaving in May or June (headhunters, take note).
Headley’s seven years at Tullow have been something of a wild ride. When he joined, the company had 360 people globally and “great growth ambitions”. At the time of our interview, Tullow employed 2,100 people from 62 nationalities across 22 countries. Rapid growth in Africa transformed the firm, requiring the HR team to build the talent base by 48% in one year alone.
To support such growth, Headley transformed the HR team from being purely transactional to offering strategic support across the globe, introducing centres of excellence around performance and talent development, reward design and HR information systems.
Supporting the firm’s African ambitions is an HR challenge he has relished. “When we started in Ghana, we were unknown,” he recalls. “The country had never had an oil industry before and trying to attract talent to an unknown company was virtually impossible.” Now, however, Tullow is a household name there, he says, “because we have changed their economy”.
With time, finding generalist HR talent in Africa has been comparatively easy, and has helped the company adapt processes to local context – “we don’t want to have long screwdrivers operating everything from London,” Headley quips. What is much more difficult is finding experienced oil field talent. Tullow has had to get creative, targeting those who have moved to more developed markets and trying to encourage them to return home.
“We do talent mapping to work out where people are, and watch them,” Headley explains. To help, his recruitment teams use social networks, job fairs and links with African student groups. He has heard of a mining company using church circuits – “The creativity of the headhunting teams is staggering.”
In Africa there is strong interest in technical and petroleum-related degrees from young people as “they see a future in their continent”, but with a young workforce (most of Tullow’s under-30s are African), being able to provide mentoring from more experienced engineers is critical.
Tullow aims to have one expat to every three graduates, but Headley says even that is “borderline”, given the expat also has a day job to do alongside the training. “We’re using our talent management system and succession planning work to inform our localisation process,” he explains. “We can also use that information to talk to governments about when we might be able to localise a position realistically.” The company also funds secondments for staff from Ghanaian national oil companies: “It’s an investment in the future, in the future talent pipeline for the industry.”
The need for experienced mentors does mean Tullow must be careful not to lose too many core skills during the downturn. Like its industry peers, it has a rapidly ageing workforce, and Headley is concerned many of his “silver surfers” may leave the sector, resulting in a skills gap it will be hard to plug. It throws the importance of succession planning into sharp relief. “If any of your ageing workforce don’t have successors, that’s your issue,” he says. “It gives tremendous focus on the succession planning pipeline and ensuring you’ve got continuity.”
The interest in engineering from young people in Africa is very different to the state of play in Europe and the US. According to a 2012 study by the Royal Academy of Engineering, the UK alone needs more than 100,000 new STEM (science, technology, engineering and maths) graduates a year until 2020 to meet demand. And Headley adds that in the UK the number of courses available in petroleum engineering reduced during each of the last three industry downturns.
However, he does believe young people from more developed economies could be attracted by the sense of adventure that comes with breaking new ground. “In Europe, people are becoming more interested in adventurous roles again,” he says. “To work on a site in Kenya, you’ll be in the middle of the desert, eight hours drive from Nairobi, with local tribes. You’ll be living in tents – good tents with air conditioning – but there’s still the risk of snakes and scorpions. It takes a pioneering spirit to work where no-one else does.” He evidently has a bit of that pioneering spirit himself, having worked in places as far flung as Indonesia and Colombia.
Conversely, it could be argued that oil and gas isn’t the most attractive career choice for socially conscious young people. BP’s Deepwater Horizon disaster still looms front of mind for many. “It has turned off a lot of people,” Headley acknowledges. “Oil companies were not aware of the strength of opinion that was developed around an incident like that. Even before Macondo [the BP spill] happened we found many people were looking at our social performance proposition as much as our business proposition. In the last 10 years, it’s been increasingly important to have a strong social performance.”
On a personal note, Headley adds the social performance aspect is something that drew him to Tullow in the first place. “One of the things that struck me as appealing was the fact we had saved 100 fishermen from drowning in a year, by setting up a recycled life vest plant; we even ran swimming lessons for the fishermen in areas we were working in. Tullow has always been socially aware and we have this ambition around creating shared prosperity. That drives our localisation strategy: we hire local people quicker than any other company I know in the oil industry. And we involve local businesses in our supply chain.”
The success of Tullow’s localisation strategy will be a key part of Headley’s legacy, he feels. Within only four years, more than 86% of staff in Tullow’s African businesses are local nationals – even more impressive when you consider some of those countries have never had an oil industry before.
Now, as Headley begins the search for his next HR leadership role, it’s a good time to reflect. He recalls that when he first left engineering for HR, it was a purely developmental move. “When I elected to stay, my engineering colleagues thought I had upset someone and was being held in HR as a punishment,” he says “I didn’t see it that way; in some ways I’ve been more comfortable in HR than engineering.”
He remains positive about the potential of HR to influence people, if it can “stand up and be counted”. And despite having spent the last seven years in a highly complex environment, his strategy remains admirably simple: “HR should create pleasure [for managers] and get rid of pain. CEOs are always saying people are their most important asset – it’s one of the biggest levers you can get, so let’s use it.”